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Malawi budget speech 2007-08
2007
Goodall Gondwe


Motion

  1. Mr. Speaker, Sir and Honourable Members, I beg to move that the estimates of the Recurrent Accounts and Development Accounts of the 2007/2008 budget be referred to the Committee of the Whole, to consider them Vote by Vote, and by Head; and thereafter, that they be adopted.
Introduction

  1. Let me from the outset, Mr. Speaker, Sir, corroborate with His Excellency the President’s “State of the Nation” address which was delivered to the House on Monday the 21st May, 2007. Inter alia, His Excellency affirmed that our country has had a successful and eventful financial year. At the top of economic achievements is an economic growth rate of 8.5 per cent in 2006. This was far above the average growth rate of 5.5 per cent for the SADC region. Furthermore, international and local experts project Malawi’s 2007 growth rate at about 6.0 per cent which again would be above the average growth rate for the SADC region. It is also remarkable, Mr. Speaker, Sir, that this accelerated growth rate is taking place in an environment of continued deceleration of an inflation rate that peaked at 17.1 per cent in February, 2006 and fell to 14.9 per cent in July 2006 and finally to 7.9 per cent in May, 2007. The prospects are that the deceleration will continue to below 7 per cent by the end of 2007. This is the fastest fall in inflation that has ever occurred in Malawi. As His Excellency said, our goal is an inflation rate of below 5 per cent next year.


  2. Furthermore, Honourable Members, it is noteworthy that the depreciation of the Kwacha has been contained to less than 10 per cent for a sustained period of over two years. Some have contested that the rate has been artificially kept down and that were we to adopt a policy of a truly flexible exchange rate, the depreciation would have been larger. But Mr. Speaker, Sir, the fact that the bureau rates have also stabilized despite their freedom of moving the rate as they wish, is an indicator that there has been no artificial repression of the rate. The relative high tobacco prices that have resulted from the President’s strong intervention in the tobacco market last year, will help boost our reserves further and to prolong this stabilization of the exchange rate.


  3. Another notable achievement has been the reduction of interest rates. The Government has exercised great prudence in managing public finances and has been able therefore to implement a policy of domestic debt repayment rather than that of an ever increasing stock of debt. This has, inter alia, brought about a progressive decline in the general level of interest rates from 30 per cent in May 2004 to the current level of 20 per cent, with prospects for a significant further fall during the year.


  4. In the real sector, Mr. Speaker, Sir, the huge increase in our maize production which followed an equally excellent crop last year was also a remarkable achievement for the country. We could, in fact, slowly be transforming the country, beginning with maize, from a “consuming and importing country to a producing and exporting country”.


  5. Mr. Speaker, Sir, on 31st August 2006, Malawi became the 20th country to attain the HIPC Completion Point status, another remarkable economic achievement. I will elaborate on the positive impact of the HIPC Completion Point later. However, I would like to reiterate our profound thanks to the donor community, the World Bank, the African Development Bank and the IMF for the cancellation of a substantial amount of our external debt. This has been an epoch making act of generosity that Malawi will never forget.


  6. Let me report on a few international accolades that we have received regarding the management of the economy. The International Monetary Fund has remarked that for the first time since Malawi began IMF programmes, more than 30 years ago, we have a sustained satisfactory performance under such a programme for a continuous period of three years and the prospects appear good that this could be surpassed. Similarly, the World Bank, in recognition of our performance, is discussing with us the possibility of establishing a Poverty Reduction Support Credit that is only extended to high performing countries in macroeconomic matters. Furthermore, Professor Jeffrey Sachs, that renowned international economist and Special Advisor to the Secretary General of the United Nations, has in various fora used Malawi as an example of how agricultural production can be rapidly turned around. He has applauded Malawi’s fertilizer subsidy programme and has recommended other countries to emulate what we are doing here. The European Union that has a strict system of rewarding good performance and, on the other hand, penalizes poor performance, has applauded Malawi for a dramatic improvement in our economic management. Even more satisfying, the United Nations Economic Commission has recently ranked Malawi as the third best performing country in Sub-Saharan Africa while we were considered one of the weakest performing countries only a few years ago. The challenge before the House today is how we can continue this acclaimed economic management.


  7. Mr. Speaker, Sir, normally these improved economic indicators are not immediately accompanied by discernible improvements in the economic welfare of the people. However, fortunately in Malawi today, a demonstratable boost of the welfare of Malawians is occurring in close parallel with the accelerated economic growth rate. The boost in food production has significantly improved food security and although there have been pockets of food shortages around the country, these are being satisfied by food supplies from within the country. We no longer have to beg for handouts from our neighbours or our overseas friends. Moreover, the fact that food production has outpaced domestic consumption means that not only is there more to eat, but that there is also excess food to sell domestically and to export. This, Mr. Speaker, Sir, is the clearest confirmation that improved economic indicators are being paralleled by robust improved welfare of the majority of the poor who are now able to produce, eat and sell more food.


  8. As a result, Mr. Speaker, Sir, Malawi has been reducing its poverty index lately. The percentage of people that live below the poverty line has moved down to 52 per cent. It hovered around 60 per cent before. In addition, although we are still unlikely to achieve all the Millennium Development Goals (MDGs) by 2015, instead of giving up on all of them, as was the case before, we are now confident that we can achieve some goals and advance robustly on all. We are particularly encouraged by our efforts in combating the HIV/AIDs pandemic. Whereas in a number of countries the percentage ratio of the affected people is rising, in Malawi it has decreased from 16 per cent to 14 per cent. This shows that the huge resources that have been entrusted to us by the international community are being used effectively. I wish to congratulate those who are leading the country in this war against this disease and aftermaths: the National Aids Commission, Non Governmental Organisations (NGOs) and the donor community that continues to supply us the needed resources. It is also pleasing to report that Malawi is on track to meet the MDG indicators on Infant and Child mortality.


  9. All these are signs, Mr. Speaker, Sir, that the economy is being turned around and that as a nation we are demonstrating that we can achieve our economic growth and poverty reduction objectives if we continue to exert discipline in the management of the economy. The question, Mr. Speaker, Sir, that this House has to answer during the deliberations of this budget is, whether we can rededicate ourselves as leaders, to the continued improvement in the performance of our economy. Only then can Malawi continue to achieve a discernable reduction of our people’s poverty.


  10. This budget, Mr. Speaker, Sir, is above anything else, concerned with how Malawi can continue and maintain the path of accelerated development that has commenced vigorously. We can either continue with this path or slide back into economic decay that characterized our country before. This Honourable House is being asked, Mr. Speaker, Sir, to make momentous decisions for the country through its deliberation of the budget.


  11. If we continue to perform, the supply of funds will likely continue to increase from domestic sources as well as from the international community. All we are asked to do is to account for it, manage it wisely and ensure that it brings about an improved welfare of the poor in urban as well as rural areas. It has been shown, here in Malawi, and elsewhere, that as long as we perform well, the international community is willing and ready to assist us maintain an effective programme of poverty reduction. The old adage that “success breeds success” or the biblical saying that “to those who have more shall be given” has been adopted by the donor community. They are making it amply clear that only those who perform will get increased aid. Our achievement of the debt cancellation is a case in point. Therefore, now the better a country performs in economic and governance matters, the higher external aid it gets.


  12. Mr. Speaker, Sir, I therefore wish to take this opportunity to applaud His Excellency the President, Dr. Bingu wa Mutharika, for his vision, economic policy and strategy that has guided us in achieving these economic results. His leadership during this phase of our economic development has been unparalleled. On his part, he wishes me to express his thanks to the country and the donor community who have rallied behind these policies. He applauds the House for its critical contributions towards these economic and financial developments. For, although we have had different opinions on matters of policy sometimes, acrimoniously at times; where it has counted, the House has rallied behind the budget as an instrument of economic growth and poverty reduction. This is as it should be. His Excellency the President Dr. Bingu wa Mutharika and his Government invites the House to continue being guided by its public spiritedness as has ultimately been the case during the last budget sessions. The Government is ready to engage in a debate of the budget that is directed at improving the economic and social welfare of Malawians.

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